As most of you probably know by now, it’s been my belief for about a year that gold’s bear market would not end until at least testing the previous C-wave top at $1050. Every D-wave correction in the secular bull has at least retraced to the previous C-wave top except one.

D waves

So until gold tests the $1000-$1050 level I think it’s premature to call the bottom. As a matter of fact I think over the next several months gold is going to drop down into its final 8 year cycle low, and that move down could be extremely painful. That is the problem with trying to pick a bottom in a bear market. If you are too early the drawdown into that final low can be extremely damaging both financially and emotionally. Let me explain.

Let’s say you are long gold and miners right now and I am correct and gold still has a move to $1000 or lower before the bear market is over. It would mean you are going to suffer a 20% or larger decline in your metals positions over the next several months. If you are heavily into mining stocks this could be a 30 to 40% drawdown. Needless to say almost no one can survive that kind of loss on their portfolio. It’s easy to imagine yourself holding through one of these multiyear cycle lows before it happens, but I can guarantee you almost no one can actually do it in real time. What happens emotionally is that when gold gets to $1000 the magnitude of the decline will make it look like gold is going to 800, 700 or 600. You may think that you can hold on but in real time it’s going to look like the losses are never going to end .In real-time $1000 gold won’t look like a bottom so you won’t be able to hang on.

But here’s what really happens to every trader trying to hold through a drawdown of that magnitude. At some point your emotions just cannot take the day after day of losses and you panic and sell. At that point you are so emotionally drained by the magnitude of your losses and shellshocked by the force of the decline that it becomes impossible to reenter the market. So when we do get the bottom, whether it comes at $1000, or $950, or $900, you are just too emotionally damaged to pull the trigger again. Unfortunately that’s exactly what you need to do. You need to buy at the bottom of the bear market. Buying at the bottom of a bear market is when millionaires and billionaires are made. Sometime in the next several months we are going to get that once-in-a-lifetime opportunity. In order to seize it you need to avoid  the drawdown and emotional damage from the final move down into the bear market bottom.

I suspect there are many of you out there who have been holding onto positions listening to the multitude of gold gurus telling you that any day now gold is going to turn and rocket to the moon. Yes gold will eventually turn and head much much higher. Personally I think it’s going to at least $5000. However, if you don’t avoid the last leg down in the bear market there’s no way you will be able to hold on for the ride back up. So as painful as it would be to take your loss now, I think it’s better to do so and get on the sidelines so you can avoid that final massacre into the bear market bottom. The all-out panic as gold moves into a major eight-year cycle low can be extremely damaging. The only way to buy at a bear market bottom is if you are in cash waiting for it. If you try to ride it out and get knocked off halfway down, you will simply be too shellshocked to pull the trigger at the bottom.

eight-year cycle low panic eight-year cycle low panic

I expect this would also correspond with the stock market moving down into its seven-year cycle low, which could unfold as a 1987 type crash event.

With the move below $1168 on Friday, gold has completed both of the requirements indicating that the intermediate cycle has topped. It has broken its intermediate trend line, and signaled a failed daily cycle (started a pattern of lower lows and lower highs).

intermediate trend line

gold failed daily cycle

As intermediate cycles don’t typically bottom until week 20-25 (and a few have even stretched to 30 weeks or longer) there is still a lot of time left before gold is due to form that final intermediate, and I suspect eight-year cycle low. A lot of damage can be done in 10 to 15 weeks, and I suspect a lot of damage will be done, culminating in a complete panic phase down into the eight-year cycle low before the intermediate cycle bottoms.

gold on week 11

In order to avoid getting caught in that debacle I strongly suggest gold bugs get on the sidelines now and stay there for the next several months until we reach that phase where gold just drops day after day and the losses become so great that it’s virtually unimaginable that this could be happening. When you see that kind of absolute panic start to unfold that’s the point where you need to put your finger on the trigger and be ready to buy in preparation for what should be the start of the final phase of the greatest bull market in history.

Look for part II of surviving the last few months of the bear market on Tuesday.


    1. karni

      Major bottom with stocks in 2016 and huge inflation pop PM/stocks before an implosion

  1. Bill in Tokyo

    I think this is great advice for traders, who spend 90% of their time thinking about trading, vs. investing – so thanks Gary!

    That said, given the backdrop of massive global debt and money printing, with possible threats like bail-in’s and metal shortages and derivatives out there, I’m thinking of cost-average into a substantial position, regardless of where gold goes. This reduces my risk by 1/2, and it gets me locked into a physical position that I can hold for several years. One fear I have is, if gold’s price is being manipulated – i.e. artificially held down – then when it finally bottoms at 1050 or whatever, well, the next day the price might just gap back to 1200 in a flash. And then go higher. Relentlessly. And it’d be hard for me to buy, because when in a bull run, gold doesn’t pull back much – it just corrects sideways . FYI I’ve never tried this, but it’s something that I think I can do, so will likely try. Not for trading, for investing. This whole world feels like we’re in a giant mouse trap, and cash is the target.

    Again, I totally agree w/Gary’s advice on trading – GDX (or XLE or whatever).

  2. Al

    Gary, great advice there and you’d be hard pressed to grumble for paying for that. Have you got a price target on silver? You think a retest of the $14 area previous DB and 200 DMA and maybe a panic as with gold down to the consolidation area of $12.50 back in mid 2010?

    Many thanks

    1. gary Post author

      During a blind panic price can go down to crazy levels, so no idea of a target.

    1. gary Post author

      Yes the Fed has stretched this much further than it would have gone naturally with QE and now blatant market interventions, But with the Nasdaq hitting 5132 and late in the 7 year cycle it’s time for a hard correction before the bubble phase in stocks begins. By hard I’m thinking a retest of the breakout at 1550 on the S&P to be followed by a wild bubble phase with the Dow hitting 25,000- 40,000 before everything comes crashing down.

      1. Peti Ole

        …reading too much Armstrong, aren’t we…?!?!
        Very likely you will be correct, though…for it is logical, not because you and Armstrong say so…..!!!!!
        Be well,


  3. Jay

    Circuit-breakers alone will ensure the stock market can’t ever crash 20% in one day. We may see another 2011-scenario where it dips 20% in several weeks/months though, but they will magically just prop stocks back up again with more QE if that happens.

    1. gary Post author

      Not a one day crash. it should take several weeks. And yes they will start QE 4 and that will drive stocks to absolutely absurd levels creating the “Fed bubble” as everyone becomes convinced the Fed is omnipotent and the market can never fall.

  4. Stefan

    I totally agree Gary about stock markets, gold and miners breakdown … maybe, not sure.

    Here is how I look upon things for the next 12-19months. I wrote this in a internal forum within a gold company forum:

    We are a year away from a major breakout in precious metals. For a restored bull we need the capital flow from common stock market and raising interest rates. We are not there yet.

    Just do an elliott wave count for Nasdaq and you’ll see the count stops at 3, every up move ends at 5. I am trading the Swedish OMXS30 at the moment and here are my ideas:

    We are heading towards geopolitical violence events affecting stockmarkets and gold&silver. First inflection next week the 10th of June.

    So 2016 is the year for the big shift imho. That is inline with some of the people that I respect,

  5. Don

    I have lost count of how many times. in the past two years, I have read or heard that gold was going to make “one more low”. Must be a catchy phrase.

    1. gary Post author

      So far it has been consistently making one more lower low so I guess the analysts have been right.

  6. Stefan

    Yes, but the last low in March was a higher low ! That might be important, but we broke the trendline that was support in June so that makes gold bearish for now.

    1. gary Post author

      If gold could have made a higher high also I would agree that it was important. But gold didn’t even come close to making a higher high. The bullion banks capped it at $1220 (other than one brief push above that level).

  7. Jonathan

    For the 2nd time in just a few days, IMF warned against the Fed rate hike. Looks like IMF knows what the Fed is going to do: it’s determined to hike, likely in September. I thought there were 2 possibilities why the Fed was so stubborn while most economists agreed it’s better to wait until 2016, 1) it’s always behind the curve, 2) it’s becoming more political. Now it’s never been clearer to me. It’s the election year!

  8. Ron

    Thanks for the notice. When gold tests its bottom, what do you expect the silver:gold ratio to do? I’ve been tracking it in near the range of 73:1 for a while now. Do you expect it to go in the direction of 80:1, or the direction of 60:1?

    1. gary Post author

      If silver can show some relative strength it would be a good sign the bottom is approaching.

  9. Scott

    If the fed wants to keep manipulating the market up and gold down that’s A.O.K. It’s a gift that I’ll take full advantage of. Anyone following along with the disastrous game they’re playing should know full well how it ends.

    1. SD3

      Yup. ‘Slow & steady’. I’m in no rush for the world to end. Little bit of silver here, a little gold there. It all adds up.

      The world will burn, soon enough.

  10. GuruWatch

    Really? Gold has gone from 1900 to 1150 and now I should sell and because of another 100 bucks or so?

    As an investor, now is the time to be dollar averaging into Gold so that you are positioned for the next bull market, not selling and thinking you will be able to pull the trigger $100 lower.

    1. gary Post author

      If you are buying physical then by all means just keep buying on the way down. It’s easy to hold physical through any size drawdown.

      But if you are trying to hold mining shares and they drop another 20-30% you aren’t going to make it. You will get knocked off and won’t be able to re-enter.

      1. Tom Edwards

        Unless you’re talking about someone forced into covering shorts, I don’t agree with this talk of “you can’t hold on, you’ll never make it.”

        My money that’s in mining shares is my “roulette wheel” money. I throw it on a number, and if it hits, it hits. If it busts, it busts. Either way, I can certainly wait for the wheel to finish spinning.

        If I see the stocks cratering, I’ll just figure that the chips got cheaper, so I buy a few more for the same price.

  11. waldipup

    “But if you are trying to hold mining shares and they drop another 20-30% you aren’t going to make it. You will get knocked off and won’t be able to re-enter.”

    Mining shares are down 90% or more .
    Anyone who’s held this long certainly can hold another “20-30%” , meaning that a former $2.00 stock now at a quarter drops to .15-.20 .
    Or a new purchaset certainly can “scale in” beginning now at .25 and buy down to .15 .

    Any comment on my previous post regarding the long term seasonals suggesting strength over the next several months?

  12. David Gunter

    Gary, I agree that this bear started when the germans made their request; however, I’d like to suggest an alternate theory – that this liability exists with the bullion banks themselves due to an understanding/agreement that the German gold held in the US could be leased out. The terms of repatriation dictated by the US probably are same as the lease arrangements, explaining why the seven year period was accepted by Germany. In other words the cost of storage was swapped for the right to lease the gold.

    However, that leaves the bullion banks to reacquire the bullion on the cheap as they are now on the hook to repay Germany, different than your scenario. As such, they are subject to an extreme short squeeze at any time – making any price predictions impossible to time.

    Meaning that an upturn could begin at any time to unwind the extremely highly levered short position in both gold and silver.

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